Singapore court clarifies approach to 'natural justice' breaches

The adjudicator in the case made the incorrect finding that contractor WCS had to satisfy him beyond reasonable doubt that it was entitled to make deductions from a payment claim by its subcontractor Glaziers Engineering. However, he did so without seeking or receiving submissions from either party on the issue, according to the judgment.

This "unusual feature" of the case, amongst others, meant that the judge felt able to set aside the adjudicator's decision on breach of natural justice grounds. He said that, had any of these features been missing, he would "almost certainly not have set aside the determination".

"[T]here is in this case a direct causal connection running from the breach of natural justice through every element of the adjudicator's analysis directly to the outcome of the determination," Judge Coomaraswamy said in his judgment. "Given the unusual features, I have no alternative but to set the determination aside."

"If the system of adjudication is to have the legitimacy necessary to perform the function for which parliament intended it, it is essential that stakeholders have confidence in the process. Where an adjudicator breaches his duty ... to comply with the principles of natural justice in these circumstances, the breach is not a mere technicality. It gives rise, in an objective sense, to a legitimate procedural concern sufficient to engage the court's supervisory jurisdiction," he said.

WCS, which was the main contractor on a residential development project, had subcontracted Glaziers to provide glass shower screens for each of the flats. When WCS did not pay on time, Glaziers pursued an adjudication. During the course of that adjudication, WCS sought to deduct losses from the amount claimed by Glaziers, arguing that its work was defective.

The adjudicator made a determination in favour of Glaziers. He said that WCS had to be able to persuade him beyond reasonable doubt that Glaziers was liable for the defective work, and that it had not done so. He did not seek, and did not receive, any evidence from the parties about the standard of proof required. Had he done so, both parties would have told him that this was the wrong standard of proof, as it is not the role of an adjudicator to decide whether the parties have objectively ‘proved’ their cases.

Having found that the failure to hear submissions on the issue was a breach of natural justice, Judge Coomaraswarmy then had to decide whether that breach was ‘causally connected to the outcome’ and whether it had caused WCS ‘actual prejudice’. He found that both of these requirements were satisfied.

“My analysis of the adjudicator’s determination shows that adjudicator’s [finding] on the standard of persuasion was an integral part of the framework of his decision,” the judge said. “It was one step on the critical path which led to his determination in [Glaziers’] favour.”

There was also evidence of actual prejudice, as the adjudicator’s decision on the merits of the application could have been different if he had applied the correct standard, the judge said.

“The decision provides further clarification on the court’s approach to the important question of when an adjudicator’s determination can be set aside for a breach of natural justice,” said construction disputes expert Joel Lim of Pinsent Masons MPillay, the Singapore joint law venture partner of Pinsent Masons, the law firm behind Out-Law.com.

“This is a welcome development, particularly given the increasing number of adjudications in Singapore and, in turn, of attempted challenges to adjudicators’ determinations,” he said.